Did NAFTA damage the prospects of free trade?
By W. James Antle III
web posted September 5, 2005
A dozen years ago, the usually academic debate over the
economics of international trade spilled onto front pages and
resonated on talk radio as never before. The North American
Free Trade Agreement (NAFTA), creating a free-trade zone
that included the United States, Mexico and Canada, divided the
country and produced coalitions that cut across both party and
ideological lines.
NAFTA was conceived by Ronald Reagan, negotiated by
George H.W. Bush, shepherded through Congress by Bill
Clinton and endorsed by every president since Richard Nixon.
Larry King shunted aside his celebrity guests to host a televised
debate on the agreement between Al Gore and Ross Perot,
exposing millions of Americans to an exchange between the
sitting vice president and the most successful third-party
presidential candidate since Teddy Roosevelt's Bull Moose
campaign on the merits of the Smoot-Hawley tariffs.
The passage of NAFTA (which I heartily supported) over
populist objections expedited congressional approval of GATT
and U.S. involvement in the World Trade Organization the
following year. It seemed to represent a lasting change in the
politics of trade. But in retrospect it might have been the high
water mark for free trade.
In late July, the House of Representatives barely passed the
Central American Free Trade Agreement (CAFTA) by a vote of
217 to 215. Even this narrow margin was secured only after the
leadership extended voting 45 minutes beyond the normal time
period and loaded transportation and energy bills with
compensatory pork (see my article on this in the Sept. 26 issue
of The American Conservative).
A month earlier, the Senate approved CAFTA by 55 to 45, the
lowest margin in that body ever for a free-trade agreement.
There too pork-barrel spending and concessions from the Bush
administration were needed to put the agreement over the top.
Some of the political resistance was a predictable consequence
of textile-state economic anxieties. But how much of it was due
to NAFTA's failure to live up to expectations?
CAFTA essentially extended NAFTA-style trade policies to six
Central American countries. "Ninety-five percent CAFTA is
NAFTA," a trade policy analyst told this writer. The difficulty the
White House and GOP congressional leadership faced in
ramming CAFTA through was thus a reflection of dissatisfaction
with NAFTA.
Trade is often blamed for job losses and income stagnation
attributable to other, more complicated economic factors.
Sometimes trade agreements win larger tariff reductions from
other countries than from the United States. But the political case
for free trade has undeniably been harmed by NAFTA boosters'
failed predictions.
For example, in violation of many such predictions, our trade
surpluses with Mexico turned into trade deficits. And more than
a decade into the increasing NAFTA-ification of our trade
policy, the overall U.S. merchandise trade deficit stands at $700
billion.
NAFTA was also supposed to curtail the flow of illegal
immigrants into America from Mexico. But instead immigration –
both legal and illegal – increased following NAFTA's passage.
To the consternation of the political class, immigration is fast
becoming one of the biggest issues in American politics.
Indeed, members of the Congressional Immigration Caucus
warned against the immigration consequences of CAFTA. And
Peter Brimelow, quoting David Frum, recently speculated that "in
the end American capitalism will probably have to choose
between free trade and open immigration."
Moreover, there have been important changes in the global
economy since we entered NAFTA. Longtime free-traders have
noted that the factors of production may now be as mobile as
traded goods, a shift with implications for comparative advantage
often ignored in the negotiation of trade agreements.
Perhaps most importantly, the recent debate over CAFTA
demonstrated the extent to which the formulation of post-
NAFTA trade policy has shifted from cutting tariffs to cutting
deals. It does not take thousands of pages, the transfer of
Congress' constitutional power to regulate trade to supranational
organizations and a host of new economic regulations to reduce
government intervention into the free market. Instead of free
trade, the result is managed-trade agreements which seek to
renegotiate the terms of protectionism rather than end it.
Which brings us to the following paradox: perhaps multilateral
trade agreements, even when they include sizeable net tariff
reductions, are no longer the best way to promote free trade.
NAFTA, CAFTA and the upcoming fight over the Free Trade
of the Americas Agreement entangle trade policy in discussions
of immigration, globalization and national sovereignty.
Ross Perot warned of the "giant sucking sound" that would
attend the arrival of NAFTA. Perhaps it's the sound of air
running out of an old establishment orthodoxy on trade.
W. James Antle III is an assistant editor of The American
Conservative and a senior editor for Enter Stage Right. The
views expressed above represent his alone.
Enter Stage Right -- http://www.enterstageright.com